The Unintended Consequences of Drug Reimportation
By David Henderson
Allowing U.S. consumers to engage in parallel trade would require pharmaceutical companies to lower prices here, negotiate price increases with other OECD governments, contracturally prohibit buyers from re-selling, or reduce drug sales to low-price countries so that they have no surplus to export. None of those options are as easy as lobbying the U.S. government to prevent parallel trade and preserve America’s status as a lone cash cow in a world of price controls.
This is from Mike Riggs, “Are Canadian Pharmacies the Solution to America’s High Prescription Drug Prices?“, Reason, January 3, 2018.
Neither Riggs nor Pilon put enough emphasis on the outcome that my co-author Charley Hooper and I predicted in an earlier 2004 op/ed,”Hidden Drug Re-import Potential,” Washington Times, February 23, 2004. Here is an excerpt:
The net result [of allowing reimportation]? Americans will get a lot of the drugs meant for Canada but will be no better off, Canadian mail-order pharmacies will get rich, and Canadian consumers will either pay higher prices or go without.
Because Canadian consumers would no longer benefit from their government’s price controls, their political support for those price controls would diminish. The net effect: possibly some relaxation of those controls.
Here, by the way, is a view that differs from that of Pilon, Riggs, Charley Hooper, and me. It’s by Joseph Bast of the Heartland Institute. I agree with Bast, Milton Friedman, and Richard Epstein (the latter two of whom are quoted in Bast’s article) that drug companies need to be able to enforce their intellectual property rights and that this is important for maintaining the incentive to develop drugs. I disagree that it is the role and right of the U.S. government to limit imports so as to help enforce those rights.